In addition to the results prepared in accordance with generally accepted accounting principles (GAAP), the Company regularly reports the following non-GAAP financial measures and other defined financial metrics: Adjusted EBITDA (loss), adjusted EBITDA margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, working capital and free cash flow.
Management of the Company does not consider non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded from these non-GAAP financial measures.
In order to compensate for these limitations, management of the Company presents its non-GAAP financial measures in connection with its GAAP results and urges investors not to rely on any single financial measure to evaluate the Company's business. Notwithstanding the foregoing, these measures may not be comparable to similarly titled measures used by other companies.
Definitions:
Adjusted EBITDA (loss) is a non-GAAP financial measure that is calculated by taking GAAP net income (loss), adding other expense, depreciation and amortization, and stock-based compensation, and then subtracting net interest income. Adjusted EBITDA margin is a non-GAAP financial measure that is calculated by dividing adjusted EBITDA (loss) by revenue.
Non-GAAP net income (loss) is a non-GAAP financial measure that is calculated by adding back stock-based compensation expense to net income (loss) and then adjusting for the non-cash portion of income taxes. Non-GAAP net income (loss) per share is a non-GAAP financial measure that is calculated by dividing non-GAAP net income (loss) by the weighted average shares outstanding.
Working capital is calculated by subtracting current liabilities from current assets.
Free cash flow is calculated by subtracting acquisition of property and equipment from net cash provided by operating activities.